Monday, March 31, 2014

Sports Matter to Dick's Sporting Goods

If you played team sports growing up, you may not be able to imagine barriers existing that would prevent American youth from participating in sports today. However, the reality is that more than $3 billion was cut from high school athletic budgets between 2009 and 2011. School districts, feeling fallout from the recession gripping the country, often made cuts to all but the most essential parts of their budgets. Sports became an easy line item to put on the chopping block. The result is that today 60% of high school students playing sports must pay fees in order to participate. And, despite the nation's economy bouncing back somewhat from the recession, the effects on scholastic sports remain. A worst case scenario predicts that 27% of US schools will not have athletic programs by 2020 if the current financial situation becomes a long term trend.

DSG Uses Its Platform

The extent of cuts felt by high school sports programs is sobering. At this rate, future generations of students will not have the same opportunities that you and me had to experience playing on a high school team. Let's face it- most high school players are not going to turn pro in their sport, and most of them will not parlay their high school experience into a college athletic scholarship. For most of us, high school sports represents the peak of our athletic "career." This experience could be taken away from thousands of students in the not-to-distant future unless something changes.

Enter Dick's Sporting Goods as a potential force for change. The Pittsburgh-based retailer has more than 500 stores and over $6 billion in annual sales. As a leading specialty retailer for sporting goods, Dick's has quite a bit at stake when it comes to reduced budgets for high school athletics. A practical aspect of this situation is that schools spending less on sports (or eliminating altogether) could hurt Dick's from a sales standpoint. Schools spending less on equipment and uniforms threatens a piece of DSG's business. More importantly, there is a long term danger to budget cuts for high schools sports: Students who are denied the opportunity to play sports that are cut or eliminated may lose interest in sports, thus damaging their long-term revenue potential as a consumer of sporting goods and apparel. 

An answer Dick's has created for this challenge is Sports Matter, a cause-related campaign in which DSG is looking to the power of crowdsourcing to help raise funds for high school sports teams. Teams with financial challenges can apply to participate in the Sports Matter program. If selected, teams will be expected to engage in fundraising online using the Sports Matter platform. DSG will match a team's total raised via crowdfunding if the team's goal is reached. Dick's has pledged to donate up to $2 million through this program.

Brand as a Living Entity

A brand is more than a name or logo, and it is more than a part of a business. Today, brands are brought to life via values and beliefs they espouse and support, just as individuals have brands and beliefs that guide their behavior. In recent years, a great deal of emphasis has been placed on corporate social responsibility, a philosophy that businesses must not only strive to maximize profits but at the same time contribute positively to communities in which they do business. For Dick's Sporting Goods, the Sports Matter initiative is more than just good business sense; it is a social responsibility platform. It would be unacceptable for DSG to stand by idly while high school sports budgets are dismantled. The brand has taken a position that the deteriorating financial position of high school sports is unacceptable, and it is putting its marketing know-how and resources to work to address the issue. 

This responsibility is borne by all brands, large and small. A business has a responsibility to be profitable for its owners, abide by laws governing operations, and act in an ethical manner toward customers and all other stakeholders. Businesses can go a step further, operating in a way that not only meets economic, legal, and ethical responsibilities but also meet philanthropic responsibilities to create a positive impact among those stakeholders that they serve.

While some people might be skeptical about the Sports Matter initiative created by DSG, perceiving it as self-interest in protecting high schools sports, we should be more concerned that more companies do not take a stand like Dick's has done. Brands have a platform from which they can influence others, but it is up to business executives to embrace their responsibility to make a difference.

Monday, March 24, 2014

MLB Seeks Growth Down Under and Elsewhere

One of the traditions of Major League Baseball is Opening Day, a time when every team is undefeated and possibilities of the upcoming season are endless. However, familiar openings of the season in Cincinnati (the Reds traditionally open the regular season at home) and Washington (where Presidents open the season by throwing out the first pitch) have been upstaged by a two-game season opening series in Sydney, Australia. The Arizona Diamondbacks and Los Angeles Dodgers opened their seasons with a two-game set at the Sydney Cricket Ground, transformed for MLB action to the tune of a $2 million makeover. It is not the first time MLB has opened the season abroad (the Boston Red Sox and Oakland A's began the 2008 season with a series in Japan). What gives? MLB is one of the most tradition-laden sports properties in America but breaks from tradition to open the season in a country not exactly known for baseball.

Why Australia

The decision by MLB to throw resources behind a season opening series in Australia may be curious to many people. Unlike the NBA's focus on large population markets of China and India, Australia pales in comparison with a population of 22 million. And, baseball is hardly the national pastime Down Under as soccer, cricket, and rugby garner much more attention from sports fans than baseball. However, baseball has become more relevant in Australia in recent years as Australia won a silver medal in the 2004 Olympics, has competed in the World Baseball Classic, and is sending more players to MLB. Perhaps the greatest motivation for MLB to promote baseball in Australia is that it has invested in the sport through 75 percent ownership in the Australian Baseball League. The six-team league began play in 2010. The schedule features 46 games from November-January (spring/summer in Australia). Creating interest in baseball through an Australian major league can fuel interest in MLB's season that just happens to run during the time the ABL is in its off season.

Growth Options- Easy as 1, 2, 3

MLB's investment in a season opening series in Australia is an example of how a sports brand can use its product strategically to drive growth. In Chapter 6 of Sports Marketing, three options to leverage products for growth are presented:
  1. Expand existing customer relationships- Sell more products (quantity or assortment) to the customers to whom you currently target.
  2. Attract new customers in existing markets- Expand product offerings to appeal to customer segments currently under-served. For many sports, women represent such an opportunity. Many female fans exist, but they have largely not been differentiated as a unique segment.
  3. Break into new markets- This option fits the MLB strategy of season-opening series in Australia and Japan as well as the NFL's decision to play a regular season game in London. Established brands like MLB, NFL, NBA, and Premier League have had success exporting their products globally.
An effective product driven growth strategy could entail all three options- strengthening relationships with existing customers, adding new customers, and opening new markets. But without a relevant product that offers value and positive experiences to users, the possibilities for growth diminish.

Monday, March 17, 2014

The $1 Billion Marketing Gamble of Quicken Loans

How would you like to combine to of your favorite pursuits into one activity? If you like NCAA basketball March Madness and you like money, Quicken Loans has an opportunity too good to refuse. Quicken's Billion Dollar Bracket Challenge could be a life changer- correctly guess the winner of every NCAA tournament game beginning with Thursday's contests and you win $1 billion- it's just that easy. Of course, it is not just that easy; odds of someone having a 63-0 bracket have been estimated to be 1:9,223,372,036,854,775,808. That is 1 in 9.2 quintillion, or in other words your odds are not very good at all. Before throwing in the towel and passing on Quicken's contest, it is worth noting that 20 prizes of $100,000 each will be awarded to the best "imperfect" brackets.

What is Going On?

Has the marketing team at Quicken Loans lost their collective minds? Why risk being saddled with a $1 billion obligation if someone does beat the odds and win the contest? At the very least, Quicken is on the hook for $2 million in prizes for the imperfect brackets plus marketing costs for the promotion. On the contrary, Quicken is poised to get a high return for its lucrative investment. Here are three reasons why:
  • Exposure from publicity - Quicken is partnering with Berkshire Hathaway, Warren Buffet's firm, on this promotion. Quicken Loans is getting extensive publicity in traditional media channels as well as via sharing on social media.In a highly competitive environment to gain basketball fans' attention, Quicken Loans may have succeeded in rising to top-of-mind when it comes to companies marketing around March Madness.
  • Treasure trove of data - The promotion has a cap of 15 million entries, or perhaps better described as 15 million data records. It is not a sarcastic statement- look at the entry form for the Billion Dollar Bracket Challenge to understand what Quicken is up to. One estimate puts the cost to secure a single high-quality lead at anywhere from $50 to $300 each. Quicken stands to secure leads (quality to be determined) for a tiny fraction of the normal cost.
  • Build customer relationships - Cynics wonder if Quicken will look to profit from data collection that occurs through the promotion, selling consumer data to other companies. Quicken insists its interest is in identifying prospective customers with whom engagement efforts can be focused. Who knows what percentage of entrants into the Billion Dollar Bracket Challenge will be high quality leads for Quicken Loans, but at least it will have captured information about a sizable batch of people that may have an interest in Quicken's offerings.

Be Creative but be Strategic

Promotions like the Quicken Loans Billion Dollar Bracket Challenge are potentially effective for their novelty and PR value alone. However, a great marketing campaign ultimately connects tactics with marketing strategy. In this case, Quicken may have an ultimate goal of increasing the number of mortgage customers or revenues. Additionally, relationship goals such as number of subscribers to an email newsletter or size of community on social networking sites could be objectives that are intermediate accomplishments on the road to securing a paying customer. Promotions are the fuel that power the marketing engine, helping an organization advance toward its goals.

If you are one of the millions filling out brackets this week, good luck!

Monday, March 10, 2014

Is Alcohol the Experience Enhancement College Football Needs?

Marketers of live sporting events are responsible for persuading fans to get off the couch (or mobile device) and invest time and money to attend games. In an environment that offers more entertainment options and indirect sports consumption opportunities than ever, more fans seem to be deciding to skip live events. This trend is particularly noticeable among younger people, with college students being among that group giving lower priority to attending games. In a recent column, Darren Rovell identifies several top-tier college football programs that have experienced alarmingly high percentages of student ticket holders not showing up for games. This trend is occurring despite the fact that students typically get heavily discounted or even free tickets to games. The effects of empty seats is felt in food and beverage revenues as well as a less than ideal picture for TV cameras- empty seats.

Is Alcohol the Answer?

One SEC athletic director is ready to consider a potential solution to rekindling the interest of students and others disinterested in attending football games: Sell alcohol in venues that are neutral sites or home games held off campuses. LSU AD Joe Alleva said in a recent interview that the SEC will review alcoholic beverage sales policies for neutral site and off-campus home games. Selling beer at football games "would enhance the fan experience," according to Alleva. Access to alcohol at venues could add to the appeal of attending a football game as an entertainment outing. And, as Alleva asserts, fans are drinking already before games while tailgating, so selling alcohol during games could be a way to control the quantity and intensity of consumption ($10 cups of beer could be another form of consumption control, I suppose). It is widely assumed that the lack of alcohol at college football stadiums is a turn off for many people weighing their entertainment options.

Walking a Fine Line

The co-mingling of alcohol and college athletics is not new. Many people question the appropriateness of beer brands sponsoring college teams and events. Selling beer at football games would be the latest chapter in an ongoing battle with alcohol consumption among young people. According to the National Institute on Alcohol Abuse and Alcoholism, alcohol contributes to 600,000 injuries, 97,000 sexual assaults, and 1, 825 deaths each year among college students ages 18 to 24. Ignoring stats like these would be to pretend that there are no problems with alcohol abuse among college students. Promoting alcohol consumption via beer sales at college football games would seem to send the wrong message, that higher education institutions are oblivious or unconcerned about the issue. Also, incidents of unruly fan behavior fueled by excessive drinking are all too common at sports venues. Exactly how alcohol would enhance the fan experience or at the expense of how many other fans are concerns many people would raise as this issue is being considered.

An Opportunity

Assuming that alcohol policies like the one that will be reviewed by the SEC gradually are relaxed and beer sales occur at college football stadiums, a huge opportunity will be created to demonstrate social responsibility. Alcoholic beverage marketers, higher education institutions, college football programs, and advocacy groups seeking to protect young people can collaborate to promote responsible consumption. Maintaining a pleasant experience for non-drinkers as well as create a safe environment for all fans will be paramount to the addition of alcohol sales enhancing the fan experience.

What is your take- Should college football stadiums allow beer sales? Will it enhance the experience of attending a college football game if attendees have the option of consuming beer?

Saturday, March 1, 2014

College Athletics: Expense or Investment?

It has been said that a college's athletic programs are an institution's front porch. Sports teams fit that analogy on two fronts. One, for many people the primary (if not only) encounter they have with a college is through observing its athletic teams. Brand image is formed about a given school from exposure to it via sports. As is the case with any brand, first-hand consumption (visiting or attending a school) is not a requirement for forming associations that make up brand image. Two, college athletics are like a front porch in that they can be the initial point of contact in building deeper relationships. Success on the field of play is particularly valuable in attracting new "customers." Recent success in the NCAA men's basketball tournament experienced Florida Gulf Coast University and Butler University translated into large increases the number of new student applications (35% and 41%, respectively). Sports serve a dual role as marketing vehicle as media coverage and game broadcasts are like free advertising. The value of this exposure was quantified for two universities making improbable runs to the Final Four. George Mason University received an equivalent of $677 million in media exposure and Butler University received a mere $410 million in exposure, according to studies assessing the impact of basketball success for those schools.

Spend Money to Make Money?

The successes stories of FGCU, Butler, and George Mason along with corporate sponsorship and media rights dollars attracted by prestigious conferences creates a perception that college athletic programs are a cash cow, pumping in large revenue streams to support themselves and share with their institutions. Sounds good, but only if it was true. Data published by USA Today of 228 college athletic programs showed that 147 of them draw 50% or more of their budgets from institution subsidies. So rather than making money, they are an expense for institutions, with 15 institutions subsidizing athletics to the tune of more than $20 million a year. Only seven athletic programs (Texas, Ohio State, Michigan, Alabama, Florida, Texas A&M, and LSU) required no institution subsidies to function. 

This often misunderstood characteristic of college athletics came to light again recently when it was revealed that Rutgers University had pumped a whopping $47 million into its athletic programs in the 2012-2013 year. The subsidy made up for a budget shortfall driven largely by Rutgers' move to the Big 10 Conference and increased expenses to support competing in its new conference. The payoff? Rutgers is expected to realize about $200 million in revenue from its Big 10 membership over the next 12 years. That figure does not include the possibility of Rutgers experiencing a bump like FGCU, Butler, or George Mason if one of its teams enjoyed a banner season.

Expense or Investment?

An athletic program may indeed be the front porch of a higher education institution, but there are questions about just how much money should be spent to decorate and maintain the porch. Should spending on athletic programs be managed more like an expense, with the aim of controlling costs and making decisions about expenditures with the overall institution mission in mind, or should athletics be viewed as an investment in marketing that can build awareness and shape brand image? Do the potential marketing benefits of athletic programs justify expenditures that for many institutions includes dipping into student and general funds to cover?